No end in sight to Bon-Ton’s struggles

Commentary

I  hope you didn’t buy stock in Bon-Ton Stores Inc. in March of 2007. At the time, the company’s stock price was $56.24.

As I am writing this, Bon-Ton’s stock price is at $1.36. That’s about what the stock was priced at in January of 2009, in the midst of the Great Recession. Bon-Ton’s stock price rebounded to $21.29 in April of 2013, but has pretty much been in steady decline since.

Bon-Ton is the parent company of Boston Store, an iconic department store brand in the Milwaukee area. The company has dual corporate headquarters in downtown Milwaukee and York, Pennsylvania. Bon-Ton operates 267 stores in 26 states under the Bon-Ton, Boston Store, Bergner’s, Carson’s, Elder-Beerman, Herberger’s and Younkers nameplates.

Like many department stores these days, the Bon-Ton stores are struggling in a changing retail environment in which consumers are increasingly doing their shopping online, especially at Amazon.com, and are spending less time and money at traditional brick-and-mortar stores.

Bon-Ton has not turned an annual profit since 2010. The company reported a net loss of $7 million in 2014 and it got much worse in 2015, with a net loss of $57.1 million.

It reported $108.1 million in net losses through the first three quarters of 2016. Its 2016 performance will no doubt look better after the fourth quarter results come in. The fourth quarter is when retailers make hay and Bon-Ton reported a fourth quarter profit of $57.1 million in 2015, but that was down from $71.7 million in profit for the fourth quarter of 2014.

It’s no surprise, then, that the company’s stock price is so low.

Bon-Ton brought on a new CEO, Kathryn Bufano, in 2014 in hopes that she could turn around the company. Bufano has an impressive retail background. Previously, she was president and chief merchandising officer of Belk Inc., a Charlotte, N.C.-based department store chain.

But the company’s struggles continue. Bon-Ton recently reported a $32.3 million drop in total sales during the holiday season.

I bring all of this about Bon-Ton up because City of Milwaukee officials are proposing a $1.9 million subsidy to Bon-Ton if the company will maintain its downtown Milwaukee headquarters operations and keep the downtown Boston Store open through 2028. The city in 2014 provided a $1.2 million subsidy to the company to keep the headquarters and store open downtown through 2018.

It is understandable that city officials want to keep Bon-Ton and Boston Store downtown, because they provide 750 jobs there. But you have to wonder if this is a good long-term investment of public funds, considering the company’s obvious struggles.

Despite the incredible growth of Amazon and the losses suffered by Bon-Ton and other traditional department stores, brick-and-mortar retail clearly is not dead. Numerous new retail developments are under construction throughout the Milwaukee area.

In the digital age, retailers need to find new ways to get shoppers in the doors of their brick-and-mortar stores. They must enhance the in-store shopping experience.

Last year, Bon-Ton renovated the downtown Boston Store and added a furniture department.

But when are more shoppers going to return to that store? The downtown area is booming, with several new apartment developments. If downtown residents want shopping options nearby, they need to support the stores in the neighborhood, like Boston Store.

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Andrew is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, he is a lifelong resident of the state. He lives in Muskego with his wife, Seng, their son, Zach, and their dog, Hokey. He is an avid sports fan and is a member of the Muskego Athletic Association board of directors.

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